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A small victory for Kazakhstan bank in its ongoing legal battle with its former chairman for US€4.6 billion: Court finds it does have a claim for conspiracy arising from breach of the bank's freezing order

As part of the ongoing litigation commenced by the Kazakhstan bank, JSC BTA Bank ("the Bank") against its former chairman, Mr Ablyazov, in the High Court case of JSA BTA Bank v Ablyazov and another [2016] EHWC, the Court once again extended the options for those seeking to enforce worldwide freezing orders.

Background

This epic legal battle for enforcement and recovery of the Bank's judgments against Mr Ablyazov for c. $4.6billion, has been ongoing since 2009. Despite the Bank's tireless efforts, it has to date struggled to recover even a small proportion of this judgment debt. In 2009, and in an attempt to prevent Mr Ablyazov from dissipating his assets and hampering the Bank's recovery, the Bank obtained a worldwide freezing order ("WFO") to prevent Mr Ablyazov from using his "assets" except to pay for reasonable legal expenses and a living allowance of £10,000 per week.

Subsequently Mr Ablyazov obtained loans totalling S$40m. The Supreme Court held that, on the basis that Mr Ablyazov was able to directly or indirectly dispose of the loan proceeds as if they were his own, they were therefore "assets" caught by the WFO. In consequence, Mr Ablyazov had breached the WFO and was found to be in contempt of Court in 2012. His son-in-law, Mr Krapunov, was also found guilty of assisting Mr Ablyazov with this breach. In order to avoid imprisonment for contempt, Mr Ablyazov fled from England and remains "on the run to avoid his sentence", but continues to instruct his lawyers "from a safe, unknown, haven". A separate WFO was granted against Mr Krapunov in 2015.

The case that appeared before the High Court this month concerned the Bank's attempt to bring a new claim against Mr Ablyazov, and Mr Krapunov, whom they made a second defendant, on the basis of the contempt of court finding ("the Defendants"). The Bank argued that there was an actionable case for damages in tort, on the grounds that the Defendants had conspired to prevent the Bank from making any substantial recovery by breaching the WFO.

The defendants' responded to this application in what the Judge described as "a manner characteristic of defendants in this litigation, namely, with vigour". They sought to strike out this claim and set aside the WFO granted against Mr Krapunov, on the grounds that:

Contempt of court does not amount to "unlawful means" which must be established in order to satisfy the criteria for a claim for unlawful conspiracy. Case law has confirmed that conspiracy to injure by unlawful means involves an arrangement between two or more parties, whereby they effectively agree that at least one of them will use "unlawful means" against the claimant, with the claimant suffering loss or damage as a result.

The Court had no jurisdiction to hear this claim as Mr Krapunov is domiciled in Switzerland and Mr Ablyazov left England in 2012.

Judgment

The Court held that contempt of court did qualify as "unlawful means", sufficient to support a claim for damages based on unlawful conspiracy.

In his judgment, Mr Justice Teare was persuaded that it was a "principled incremental step" justified by a Supreme Court decision which found that the crime of cheating the HM Revenue amounted to unlawful means.

The Judge also confirmed that the English Court had jurisdiction under Article 5(3) of the Lugano Convention since arguably the damage which gave rise to these events (i.e. the conspiracy) took place in England, as did the damage which occurred (i.e. the Bank's cause of action arising from the WFO and judgment).

Comment

The Court's approach demonstrates yet again a willingness to allow increasingly innovative means of enforcing WFOs. As mentioned above, this decision follows the Supreme Court's judgment which allowed the proceeds of Mr Ablyazov's loan to be treated as "assets" caught by the WFO. Now it also appears that a claimant may be able to pursue a claim for damages on the grounds of unlawful conspiracy against a defendant or third party who helps frustrate a WFO.